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CORE banking, a black box explained

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CORE banking, a black box explained

  1. 1. Core Banking, a black box explained Fintech Ruminations, 25-03-2021
  2. 2. Agenda ● What is a CORE Banking system? ● History of the CORE ● CORE system main elements ● Make VS Buy VS BAAS ● Want to know more? CORE Banking - Fintech Ruminations, 2021
  3. 3. What is a CORE Banking System?
  4. 4. What is a CORE Banking System? 1. the tough central part of various fruits, containing the seeds. "a pineapple core" 2. the part of something that is central to its existence or character. "the plan has the interests of children at its core" CORE Banking - Fintech Ruminations, 2021
  5. 5. What is a CORE Banking System? CORE is the acronym for Centralized Online Real-time Engine A CORE banking system is a system that tracks, in a centralized way, transactions coming from multiple channels, real time. CORE Banking - Fintech Ruminations, 2021
  6. 6. History of the CORE
  7. 7. History of the CORE system Pre Internet banks were very different... CORE Banking - Fintech Ruminations, 2021
  8. 8. There were essentially 3 channels to move money: Branches, Transfers and Checks. Transactions were recorded on the local ledger (server) of the branch and data was sent in batch at the end of each day to the HQ. History of the CORE system CORE Banking - Fintech Ruminations, 2021
  9. 9. History of the CORE system With the introduction of CORE systems, transactions were processed real time into a single centralized server. CORE Banking - Fintech Ruminations, 2021
  10. 10. CORE system main elements
  11. 11. CORE system main elements Today, financial complexity exploded: value can be stored in many different ways, it can be moved through many more channels and there are a wider arrays of financial products. In order to enable all these use cases, a more complex CORE Banking system is needed. CORE Banking - Fintech Ruminations, 2021
  12. 12. CORE system main elements CORE Banking - Fintech Ruminations, 2021
  13. 13. CORE system main elements - Channels Channels are ways to move money in and out of the user accounts. Existing channels evolves and new channels constantly arise. A modern CORE system should cheaply support existing channels and quickly enable the ingestion of the new ones. CORE Banking - Fintech Ruminations, 2021
  14. 14. CORE main elements - Fincrime The Fincrime module is in charge of flagging transactions and blocking the suspected criminal ones. The CORE system should contain its own fincrime engine or allow the simple integration of external tools (like Feedzai). CORE Banking - Fintech Ruminations, 2021
  15. 15. CORE main elements - Product Engine It is the piece of the system that allows the creation a wide range financial products at scale: credit cards, credit lines, overdrafts, checking accounts, saving accounts. It should be as flexible as possible to enable a composable banking experience. CORE Banking - Fintech Ruminations, 2021
  16. 16. CORE main elements - Ledger The core of the CORE. The “book” where all the transactions happening in the bank are booked and stored. It constitutes the underlying data substrate for all the accounting and reporting activities. CORE Banking - Fintech Ruminations, 2021
  17. 17. Future evolutions: Make VS Buy VS BaaS
  18. 18. Make VS Buy VS BaaS Make Buy BaaS CORE Banking - Fintech Ruminations, 2021
  19. 19. Make Build everything in house: integrations to payments scheme, ledger, product engine, reconciliation tools. And obviously get your own banking license. ● Extreme flexibility ● Low marginal costs at very high volumes ● Significant resource necessary for the active development and support ● High cost at low volumes ● Banking license downside PRO CONS CORE Banking - Fintech Ruminations, 2021
  20. 20. Buy Buy the CORE from external providers. You don’t have to build everything from scratch and you just need few teams to support the CORE. Still in charge of obtaining the banking license. ● Minimal resources invested in the support of the CORE ● Low marginal costs for low volumes ● Limited flexibility ● Higher cost for high volumes ● Banking license downside PRO CONS CORE Banking - Fintech Ruminations, 2021
  21. 21. BaaS Buy everything from the outside (CORE, Banking license) and only focus on the interaction with the User. Perfect to bootstrap the business, but very hard to differentiate beyond marketing. ● No resources invested in the support of the CORE ● Low marginal costs for low volumes ● Very limited resources invested in Compliance topics ● Extremely limited flexibility ● Very high cost to scale up PRO CONS CORE Banking - Fintech Ruminations, 2021
  22. 22. Want to know more?
  23. 23. What to know more? ● https://www.mckinsey.com/industries/financial-services/our-insights/banking- matters/next-generation-core-banking-platforms-a-golden-ticket ● https://fintechruminations.com/2020/09/08/a-neobank-stack/ ● https://docs.google.com/spreadsheets/d/14ATilCQpL2WT2YiijHwzCIfRL8lRa PiUKQ44a5aItaE/edit#gid=0 ● https://www.quora.com/How-do-we-understand-the-CBS-of-the-bank-its-functi ons-technicalities CORE Banking - Fintech Ruminations, 2021
  24. 24. What to know more? PODCASTS ● Core banking in the cloud MAMBU (03/2017) - HERE ● Core Banking as a competitive advantage by Thought Machine (07/2019) - HERE ● Changing face of core banking technology BBVA (04/2020) - HERE ● Rotten to core banking - HERE ● Marqeta core banking system - HERE ● Building the AWS of banking - HERE ● Rethinking the core for an elegant banking experience - HERE ● The changing face of core banking technologies - HERE CORE Banking - Fintech Ruminations, 2021
  25. 25. Thanks.

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